Vipul b Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $128,100.Project 2 requires an initial investment of $93,600. Assume the company requires a 10% rate of return on its investments. (PV of $1. FVof $1. PVA of $1. and EVA of $1) (Use appropriate factor(s) from the tables provided.)Annual AmountsSales of new productExpensesMaterials, labor, and overhead (except depreciation)Depreciation MachinerySelling, general, and administrative expensesIncomeYears 1-7Project 1Net present valueYears 1-5Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project 2. (Negative net presentvalues should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearestwhole dollar.)Project 2Net present valueNet Cash Flows xNet Cash Flows xPresent Valueof Annuity at10%Project 1$ 101,700Present Valueof Annuity at10%67,60018,3008,320$ 7,480Present Value ofNet Cash FlowsProject 2$ 79,400Present Value ofNet Cash Flows33,28018,72020,800$ 6,600

NPV is the difference between the present value of cash inflows and the present value of cash…

Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project 2. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar) Years 1-7 Project 1 Net present value Years 1-5 Project 2 Net present value Present Value Net Cash Flows x of Annuity at 10% Net Cash Flows x Present Value of Annuity at 10% Present Value of Net Cash Flows Present Value of Net Cash Flows

Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project 2. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar) Years 1-7 Project 1 Net present value Years 1-5 Project 2 Net present value Present Value Net Cash Flows x of Annuity at 10% Net Cash Flows x Present Value of Annuity at 10% Present Value of Net Cash Flows Present Value of Net Cash Flows

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

Vipul b

Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $128,100.
Project 2 requires an initial investment of $93,600. Assume the company requires a 10% rate of return on its investments. (PV of $1. FV
of $1. PVA of $1. and EVA of $1) (Use appropriate factor(s) from the tables provided.)
Annual Amounts
Sales of new product
Expenses
Materials, labor, and overhead (except depreciation)
Depreciation Machinery
Selling, general, and administrative expenses
Income
Years 1-7
Project 1
Net present value
Years 1-5
Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project 2. (Negative net present
values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest
whole dollar.)
Project 2
Net present value
Net Cash Flows x
Net Cash Flows x
Present Value
of Annuity at
10%
Project 1
$ 101,700
Present Value
of Annuity at
10%
67,600
18,300
8,320
$ 7,480
Present Value of
Net Cash Flows
Project 2
$ 79,400
Present Value of
Net Cash Flows
33,280
18,720
20,800
$ 6,600

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